Ahold Annual Report 2003 33
Risk Factors
A continued economic downturn could materially
adversely affect our business.
In some markets our business has been negatively
affected by many factors, including high consumer
debt and unemployment, resulting from the prolonged
economic downturn in 2001, 2002 and 2003. High
unemployment rates have depressed consumer
purchasing power and declining confidence in the
economy has caused customers to decrease spending
and to shift buying habits. In some markets, we have
been forced to lower prices and have lost market share
to mass merchandisers and other
value-based operators. A continued or deepened
recession could materially adversely affect our financial
condition, results of operations and liquidity.
The application of International Financial Reporting
Standards ("IFRS") instead of Dutch GAAP in the future
preparation of our consolidated financial statements
could have a material adverse effect on our operating
income, equity and financial condition.
We currently prepare our financial statements
in accordance with Dutch GAAP and prepare a
reconciliation to US GAAP, as required by SEC
regulations. In June 2002, the Council of Ministers of
the European Union adopted new regulations requiring
all listed EU companies, including us, to apply IFRS
in preparing their consolidated financial statements
no later than January 1, 2005, or at such time as
may be otherwise required by the European Union.
The adoption of IFRS may have a considerable impact
on a number of important areas. While the impact
of IFRS is difficult to predict with any certainty at this
time, the adoption of IFRS could have a material
adverse effect on the level of our reported operating
income and financial position.
We have certain anti-takeover arrangements that may
impact the value of an investment in Ahold compared
to a competitor.
Like many other listed companies in The Netherlands,
we have an arrangement in place that may delay or
prevent other parties from acquiring control over us.
The SAC has the option to acquire from us, from time
to time until December 2018, cumulative preferred
shares in an amount up to a total par value that is
equal to the total par value of all issued and outstanding
shares of our capital stock, excluding cumulative
preferred shares, at the time of exercising the option.
This arrangement has anti-takeover effects.
The issuance of all authorized cumulative preferred
shares would cause substantial dilution of the
effective voting power of any shareholder, including
a shareholder that attempts to acquire us, and could
have the effect of delaying, deferring or preventing a
change in our control. For additional information
on the SAC, please see "Corporate Governance -
Part II: Corporate Governance Provisions -
9. Cumulative Preferred Shares."
Our ability to pay dividends will depend on the future
condition of our business.
Historically, we declared dividends twice a year. As we
announced in a press release on March 5, 2003, we
determined that we would not pay a final dividend on
our common shares in respect of 2002. In addition, we
have announced publicly our intention to not pay any
further dividends on our common shares until we obtain
an investment grade credit rating profile. The payment
of any dividends on our common shares in the future
will be at the discretion of our Corporate Executive
Board and Supervisory Board, and will depend upon,
among other things, the evaluation of our credit rating
profile, future earnings, operations, capital and liquidity
requirements, our general financial condition, the
general financial condition of our subsidiaries, future
prospects and other factors that our Corporate Executive
Board and Supervisory Board may deem relevant.
Furthermore, the December 2003 Credit Facility
imposes limitations on our ability to pay dividends.
We expect to pay a dividend on the preferred financing
shares in 2004.
Our business is subject to environmental liability risks
and regulations.
Our businesses are governed by federal, state and local
environmental laws and regulations in the United States,
as well as environmental laws and regulations in the other
countries in which we have operations, including those
concerning the discharge, storage, handling and disposal
of hazardous or toxic substances. We cannot assure you
that stricter laws will not be imposed or that there will not
be stricter enforcement of applicable environmental laws,
which may result in our having to make expenditures in
order for us to comply with such laws. Our failure to
comply with any environmental, health or safety
requirements, or increases in the cost of such
compliance, could have a material adverse effect on our
financial condition, results of operations and liquidity.
